This Battle Over Aircraft Subsidies is Heating Up

Following a ruling made by World Trade Organization appellate judges last March, the European Union said it would ask the organization for the right to impose up to $12 billion in annual sanctions against the United States for its violation of global trade regulations.

On March 12, the WTO ruled that Chicago-based Boeing (NYSE:BA) had received at least $2.6 billion in illegal subsidies from the U.S. government in the form of research and defense contracts between 1989 and 2006. According to the ruling, this aid had “adverse effects” on France-based Airbus, which vies with Boeing to be the world’s largest producer of commercial jets.

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On September 24, the United States submitted a compliance notice to the WTC, which was rejected by the European Commission two days later.

The Commission said in a statement made in Brussels on Thursday, “The lack of information in the US notification unfortunately facilitated a quick review which suggests that the US has neither withdrawn the illegal subsidies granted to Boeing, nor removed their adverse effects.”

Because the United States continued to be in noncompliance with the WTO Boeing ruling, the European Commission requested $12 billion in sanctions “based on estimates of the damages suffered by the EU due to unfair and biased competition from the U.S. industry.”

This dispute between the U.S. and the EU is part of a seven-year disagreement over aircraft subsidies. Last December, the World Trade Organization ruled that Airbus had received similar illegal subsidies, at which time the United States asked the WTO to approve between $7 billion and $10 billion in retaliatory sanctions.

The European Union will put its request for sanctions to the World Trade Organization’s Dispute Settlement Body on October 23.

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